276 F. 209 | 6th Cir. | 1921
Appellants are husband and wife and reside at St. Louis, Mo. Mrs. Dunaway owned a tract of land in Henry county, Tenn., containing about 1,200 acres, partly timbered and partly cultivated. December 18, 1916, the Dunaways borrowed, in substance, from the Cottage Grove Bank & Trust Company, located at Cottage Grove, Tenn. (hereinafter called the bank), $9,000, giving -a note for $9,900 (being the principal and interest at 10 per cent, for one year), payable one year from date, securing the same by deed of trust (hereinafter called a trust mortgage) upon the land, running to appel-lee Rainey, a prominent stockholder in the hank. The note was not paid at maturity, and Rainey instituted foreclosure proceedings, advertising the land for sale on April 8, 1918. The 'Dunaways, being unable to pay the mortgage, made on June 1, 1918, a written contract with appellee Puryear — who at the time the loan was made was cashier of the bank, but who had resigned about February 1, 1917 — under which the Dunaways conveyed to Puryear an undivided one-third interest in the tract (Puryear assuming the payment of one-third of the mortgage debt), and whereby the entire tract was to be delivered to Puryear’s exclusive possession, management, and control for a period not exceeding five years from the 2d day of September then next,
In March, 1919, Puryear obtained in a state court of Tennessee an injunction restraining asserted interference by Dunaway with .Pur-year’s operation under the contract, and on April 30, 1919, this suit was brought by Mr. and Mrs. Dunaway in the District Court below against Puryear, Rainey, the bank, and live workmen, asking a cancellation of the contract and deed of June 1, 1918, for the, recovery of damages for alleged waste and other alleged misconduct by Puryear, for the elimination of asserted usurious interest on the mortgage loan, and for injunction against Puryear from further operations on the laud, and against the bank from foreclosing the trust mortgage. The prominent grounds on which the right to such relief was asserted, so far as necessary now to be stated, were that the making of the contract and the conveyance of a one-third interest in the tract to Puryear, as well as the latter’s possession of the entire tract, were obtained by active fraud, especially in that Puryear had agreed, as asserted, to make and deposit in escrow a reconveyance to Mrs. Dunaway of the one-lhird interest conveyed to him, to be delivered and become fully operative as soon as the mortgage debt should be fully paid off; in that connection, that the two instruments of june 1, 1918, were represented by Puryear as desired by the bank and were intended La be an additional security merely for the benefit of the bank and for the payment of its mortgage debt;
Rainey, Puryear and the bank filed answer and cross-bill,
Final hearing was had on the merits before the late District Judge McCall; the testimony of the Dunaways, Puryear, and Rainey, and
The effect of these explicit provisions is not, in our opinion, overthrown by the further provision that “on extinguishment of said debt
The trial judge in terms found that “the evidence decidedly fails to support the contention” that the deed and contract were intended as additional security to the mortgage debt. We think the weight of the evidence sustains that conclusion. Here, again, plaintiffs’ contention is in the face of the unambiguous language of the written contract, and the proof offered to sustain it is anything hut convincing. Plaintiff’s ter imony to the effect, stated is disputed by both Puryear and Rainey, and in part by two other witnesses. The trial judge well said that there was no need for additional security, inasmuch as the land was worth three times the amount of the mortgage debt; that the conveyance of one-third of the tract added nothing to the mortgage security; that three months were given plaintiffs to afford additional opportunity to pay off the mortgage, and that Puryear himself arranged for money to pay the interest on the note during that three months; and that the contract and deed were executed to prevent sale under the mortgage and to enable plaintiffs to save all of it, except the one-third which they conveyed, to Puryear for his assistance in the matter. The evidence, taken together, is not convincing that the hank had any interest in the deed or contract, or that the giving of these instruments had any relation to the bank’s benefit, except as the bank undoubtedly preferred to have the debt paid without foreclosure and sale, and so was willing to delay such sale in the event of an arrangement such as that with Puryear, which seemed reasonably to assure such payment. In our opinion the charge of conspiracy between Rainey, the bank, and Puryear is not made out. The fact that when this case was heard below Puryear bad become president of the bank is not of great significance.
“When the consideration passing to plaintiffs for the one-third interest conveyed to Puryear, as disclosed by the evidence, is considered, it cannot be said of a truth that it is unconscionable. Indeed, when considered in the light of the facts and attending circumstances as of the time of the transaction, it appears that the contract was advantageous to plaintiffs.”
In this conclusion we fully agree. An opposite conclusion is not justified by the changed conditions which Puryear’s efforts and the het-ter financial situation which followed the Armistice in November/1918, hád effected. It may well be that, jf plaintiffs had been able to defer the foreclosure sale until a reasonable time after the close of the war (a date then wholly conjectural), they might have saved the entire of the land (less the mortgage) without Puryear’s help; but the record is to the contrary of such ability. The question of unconscionableness must be tested by the conditions which existed on June 1, 1918, when the foreclosure proceeding was ripe for final sale, and plaintiffs were without means to avoid the same, except through some unusual arrangement.
The testimony of alleged discouragement by Rainey and Puryear of the refunding of the loan by plaintiffs after Puryear’s operation was well under way has no impressive significance. In large part it was either denied, or offer of denial made. If Puryear’s contract was valid, he, as owner of a one-third interest, was under no obligation to encourage a refunding of the mortgage debt, which he was then actively engaged in paying off under his contract.
The decree of the District Court is affirmed.
On Motion to Modify Judgment.
Appellants ask that the opinion and judgment of this comí be so modified as to leave to the discretion of the District Court how far appellants may investigate the good faith of respondent Puryear in executing the contract in question and accounting for proceeds of the timber.
The decree below, which was affirmed by this court, has finally established the validity and, enforceability of the contract of June 1, 1918. It constitutes a final rejection of appellants’ allegations of waste as affecting the validity of appellants' right to terminate or avoid the contract. It finally dismissed plaintiffs’ bill, except in certain particulars not now important. It precludes all further question of the good, faith of defendant Puryear in entering into the contract or procuring its execution by appellants.
When the testimony was taken, however, the mortgage had not been fully paid, and there was no occasion for an accounting of receipts and disbursements and. operations under the contract. In our opinion, the trial court’s action upon the question of damages did not have the effect, in view of the dismissal of the bill, of retaining jurisdiction over an accounting of receipts and disbursements and contract operations.
We find nothing in the previous opinion of this court which affects the question of the extent to which the alleged wastefulness on the one hand, or good faith on the other, in cutting and marketing the timber, or in otherwise carrying out the contract, would he related to or could be considered in any accounting which might be had in another action respecting defendants’ operations under that contract, which must be treated as valid and enforceable.
The reference in our previous opinion to the allegation of “inefficiency or waste on Puryear’s part,” as overthrown by what he had accomplished, was properly addressable to alleged waste, as giving right to terminate a contract otherwise valid.
The petition for modification of judgment is accordingly denied.
Mrs. Dunaway was given until September 3, 1918, in which to pay the •mortgage debt, in which event the contract should at once terminate.
The Dunaways had paid nothing upon the mortgage debt, except as Pnr-yoar, on the signing of the contract, indorsed to them a note for $400 to carry the interest from June 1st to September 3d.
We treat the bill as broad enough to include, as a ground of relief, the alleged fact that the deed and contract were taken as security for the mortgage debt to the bank.
The other defendants joined in the answer proper.
After the decree was entered, motions for leave to amend the bill to meet asserted proofs and for rehearing were denied. If the decision on the merits was correct, these denials are unimportant, and they are not discussed in the briefs of counsel.
The trial judge says of this draftsman: “He is a good lawyer, and did Oils work for (hese parties not as an attorney for either party but for an accommodation.”
The trial was begun October 31, 1919.